Higher Education Loans Board (HELB) beneficiaries could begin servicing their loans after a duration of five years after completing their studies. This could only happen if a new bill currently in parliament is passed into law.
The proposed HELB Act changes, also seek to reduce the interest rate that beneficiaries have to pay from 4% to 3%.
If the proposal is passed into law, it will provide massive relief to many young graduates who have lost their jobs because of the economic recession that has happened since schools were closed in March.
According to a report by the Kenya National Bureau of Statistics (KNBS), over 1.7 million Kenyans have lost their jobs between the months of April and June 2020. This is attributed to steps companies took such as cutting down on employee numbers to shield themselves from the economic recession caused by COVID-19.
“These proposals intend to reduce financial strain endured by graduates who are expected to pay a lot of money to HELB even before being employed anywhere or before they become stable financially.
“The percentage of levied on loans could be three percent if the proposed bill is passed into law. The proposals also provide the penalty on defaulting the loan to be charged after the graduates have been employed or five years after they completed their studies,” reads the bill.
At this moment, HELB beneficiaries are required to begin repaying their loans one year after completing their studies. This requirement stands regardless of whether you are employed or not.
A fine of Kshs. 5000 per month is levied on defaulters.
This has put thousands of graduates on the defaulters’ book since most of them take a long time to get employed, that is, if at all they get employed. Those who do not secure employment risk being blacklisted by the Credit Reference Bureaus (CRB).
HELB has also been after 78,300 defaulters who owe it more than Kshs. 7.7 Million by December last year.
The Loans Board even threatened to publish the names of individuals who have not repaid what they owe to it, in an attempt to shake them up to begin repaying their loans.
Ideally, graduates are supposed to repay their loans so that the money can be used to pay the loans needed by new students in colleges and universities.
HELB has been facing difficulties due to the high default rates and a huge increase in those who deserve to apply. The government’s offer has not been to the required amount to match the rate of rising University admissions.
Read also: